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Government to insure money market funds

/ Source: The Associated Press

The Treasury Department says it will tap into a Depression-era fund to provide guarantees for the nation’s money market mutual funds while the Federal Reserve says it will expand its emergency lending program to help support the $2 trillion in assets of the funds.

Seeking to deal with a severe financial crisis, the Treasury and the Fed announced separate actions on Friday designed to bolster the huge money market mutual fund industry, which has come under stress in recent days.

The Fed said it expanding its emergency lending efforts to allow commercial banks to finance purchases of asset-backed paper from money market funds. The central bank should help the funds to meet demands for redemptions.